Traders work on the floor of the New York Stock Exchange (NYSE) on Monday in New York City. Following Fridays's over 600-point drop, the Dow Jones Industrial Average briefly fell over 1,500 points in afternoon trading before closing down at 1,175.21 points. (Spencer Platt/Getty Images)

Leon Wolf

Feb 5, 2018 6:30 pm

In a chaotic day of trading, the Dow Jones Industrial Average plummeted by as many as 1,600 points on Monday. By the closing bell, stocks had rallied somewhat, but the DJIA still closed the day with a loss of over 1,100 points, which is the largest single day point loss in the stock market’s history.

The loss equalled about 4.6 percent of the market’s total value, and by that measure it was only the worst single-day crash since the European banking crisis of 2011.

Although there was not an obvious piece of news that led to the drop, and some analysts have indicated that computer-driven trading behavior may have been to blame, there were a couple possible causes for some of the market’s free fall.

Some of the drop may have been caused by apprehension that incoming Fed chairman Jerome Powell may raise interest rates at a faster rate than his predecessor, Janet Yellen. Financial analysts have long sounded a note of caution that the current strong economic conditions — which have been bolstered by a prolonged period of low interest rates, which Yellen has been slowly and gradually raising as the economy has shown signs of health — may lead to unhealthy rates of inflation.

Although that inflation has not materialized yet, the concern has been that Powell might change Yellen’s policies especially in light of the economy’s robust overall health, even though he has publicly announced that he plans to continue Yellen’s overall approach.

Also, as CNN noted, bond markets have been showing increasingly robust yields, which has led to concern among traders that investors could abandon the stock market in favor of lower-risk bond investments if the trend continues.

Monday’s free fall was enough to wipe out all the gains made by the Dow Jones thus far in 2018.

The NASDAQ and S&P also experienced significant losses today, with both losing around 4 percent of their total value.